Skip To Content

Common law vs. Civil law: Key differences in Canadian commercial real estate law (Webinar)

Nov 17, 2016

Osler’s National Real Estate Group demystifies the most common differences between and misconceptions about the common law and civil law systems governing commercial real estate in Canada. Learn practical strategies and tips to avoid pitfalls and maximize your investments across multiple jurisdictions.

Topics include:

  • Ownership and Co-ownership
  • Purchases and Sales
  • Leases (a lease is not real property in Quebec)
  • Landlord Remedies
  • Security
  • Environmental issues
  • Employment issues

Our panelists will include partners from our real estate group:


Video transcript

HEATHER MCKEAN: Hello and welcome to the Osler webinar. Thank you for joining us. My name is Heather McKean, and I'm a partner and the Chair of the National Real Estate Group at Osler. And I will be your moderator for today. Despite our title, which might suggest something a little different, what we want to do today is a comparison of real estate law in Ontario and Quebec. Because they are very different, and sometimes that can be mystifying.

A couple of housekeeping points before we get started. We start on the hour and we will end promptly on the hour, if not before. We've left about 5 to 10 minutes for questions at the end. You should see our cover slide on your screen. If you did not receive the slides, we will be sending another copy with our follow up email.

We will advance the slides as we move through the discussion. And at the top right hand corner of your screen, you will also see a facility that enables you to submit questions during the webinar. If it's hidden, just click on the red arrow on the top right hand corner. We will try to integrate questions into today's presentation. We've allocated a little time to answer questions. And if we don't have an opportunity to answer your question, we will certainly follow up with an email response later this week.

Your feedback is very important to us and we plan to use it both for the content and structure of future webinars. And to that end, later today, you will receive an email with a survey about the webinar and we'd appreciate it if you could take a few minutes to complete it. Finally, and importantly, professional development or CLE credits, you will receive an email later this week with your Ontario and Quebec CPD certificates of attendance.

And now, I would like to introduce my colleagues who are presenting today. Yan Besner is a partner in our Montreal office who does all sorts of commercial real estate. And he is going to help us demystify civil law. Rod Davidge, a partner in our Toronto office. Rod does all types of real estate but specializes in rates in particular. And Paul Morassutti who also specializes in all sorts of real estate in Toronto, but has particular expertise in leasing and with respect to environmental and contaminated land matters, and is a member of our retail group and franchising and environmental practices. So now, I'm going to turn things over to Yan to begin the discussion.

YAN BESNER: Thanks, Heather, and good afternoon, everyone. As Heather mentioned, I'll try and demystify what makes quote, unquote, "our province distinct" start off with an early bad joke. I'm Canadian real estate-- sorry, I'm Quebec real estate, specifically with civil rights of ownership and the different ways to exercise those rights as we go through the topics that we felt here are important. And more importantly, we'll have practical-- we'll give you some practical assistance in your day-to-day dealings in the properties that you either own, or finance, or at least if you are based outside the province of Quebec and are trying to at least make a comparative analysis as to what works in Quebec versus elsewhere.

So to get started, I think it's important to have a primer on ownership and the rules of ownership of real property, or immovable property, as we call it in the province of Quebec. And everything is governed by our civil code. And to simplify it even further, ownership, and I mean ownership can be real or personal, ownership has three components derived from the Roman law.

Look at it as a pie, if you will, the pie making the whole, the usus, the fructus, and the abusus. I am not swearing and I apologize for my very bad Latin. So usus refers to the right of the use of the thing for the purpose which it is adapted, while fructus is the right to take all fruits and revenues. The third component, abusus, which is the interesting one, is the right to alienate, granting security interests, selling, changing the destination of the thing.

Now, with that, a key practical distinction that you may come across on is ground leases that some of you may be used to having in your backyard versus-- and trying to get the same result in the province of Quebec. And by that, I mean being able to own your building when you don't necessarily own the real estate that's under it, and how do you get to that end result.

So there are two options under civil law for-- to get to that. And one is emphyteusis and the other one is superficies. Emphyteusis is a dismemberment of the right of ownership. Meaning you have a couple of the rights of the three rights that I mentioned before, but not all of them. And more importantly, in this case of emphyteusis, and for not the whole time.

So emphyteusis is a temporary right of full ownership of real estate. And it's established by a contract that has to be established with the direct intent of the parties. And the basic four characteristics or essential features, if you will, is one, the existence of an immovable, two, the obligation to build a construction of permanent nature that will add value to the piece of real estate.

Now, the works have to be permanent, but they don't have to be a 10-foot-- sorry, a thousand foot story building, or something huge, a huge tower, it can be a parking lot. But it has to have a permanent nature and it also has to add value. It's got to have a term ranging from 10 to 800 years, can't be longer than 100 years. And throughout the term, the emphyteutic lessee, and when I say lessee, I don't mean tenant, access all the court-- has all the rights and obligations of an owner.

Now, what does that mean? That means it's going to be receiving all of the tax bills. It's going to be able to lease the property as a head landlord. It's not a sub-- it won't be leasing as a sub landlord. It'll be able to mortgage or hypothecate the property, finance it. That being said, all the real rights that are registered in terms-- if we're talking servitudes, if we're talking HIPAA facts, which are mortgages, all of those disappear at the end or the expiry of the term of the emphyteusis. And all of the works and the improvements that were made by the emphyteutic lessee revert back free and clear to the owner, the actual underlying owner of the property, at the end of the term without any compensation payable whatsoever to that owner.

What's important to note is when you create an emphyteusis, there are transfer duties payable, whether it's for 10 years, 20 years, up to 100 years. That's something to keep in mind as we move to the next, I guess, structure that I want to discuss, which is superficies. Superficies is not a dismemberment, but really a mode of ownership, a division if you will.

So again, it'll be very similar to what you would understand or know as the ground lease. And in many cases, the most popular way in which superficies are created in Quebec is by way of a lease with a permission to build. But when there is a permission to build, and the renunciation of the benefit of accession, which essentially means that any building or permanent structure that is built on land normally reversed and becomes to the owner-- becomes the ownership of the actual owner of the real estate upon affixation, in superficies, that is temporarily deferred during the term of your lease with permission to build. And therefore, the tenant or superficiary, owns the building and is responsible for it.

Now, what's interesting to note here is that transfer duties won't be payable as long as the lease is below 40 years, which is the threshold for transfer is to be payable on any lease. So that is something that parties do tend to go towards instead of the emphyteusis because you can actually save quite a bit of money on it.

The difference here though, however, is there is a problem with granting security on the building that is quote, unquote, "owned" by the superficiary. Because then you have to actually create a new lot number go through what we call cadastral operation to create a separate numbered parcel, so that same can be charged.

Now, the problem with that is that at the end of the term, even though the security against-- even though-- sorry, even though the ownership of the improvements can revert back to the owner, the security on those buildings would remain, even though a security against the actual underlying lease or agreement that created it, that evaporates.

Another big distinction between the two is that if the value of the improvements subjects the superficies are worth more than the underlying subsoil, and less contracted out of in the actual lease, the subsoil owner has to-- may lose his underlying ownership. Because there is no civil code and option for the superficiary to buy out the subsoil. And therefore, the original owner, if the value of his works are worth more than what they're built on.

This is not just a question of unground below grade, these are volumes of air. So you can actually have superficies going up at different levels. And they can even be below ground, obviously subject to mining rights and other things.

So these are some things to think about, obviously, the slides are a lot more detailed with regards to these types of structures. And I kind of turned over to my colleagues just to compare and contrast, if they've got anything to add.

And I think as Yan noted, that the sort of corresponding concept we would have would be a ground lease in Ontario and other spots that are in the common law. It doesn't differ from another lease, really, in terms of how it creates an interest in real estate. So a ground is in itself really just connotes a spot where people have decided usually to do a long term, and often to lease the ground, i.e. Someone else either has the rights to the building or builds the building.

But it's a very flexible thing. You can reach the agreements you want contractually in terms of ownership of the building in the interim, return of the building on the land, or requiring someone to get rid of a building they built during the term of the ground lease before the end. All of that is flexible.

Often term and those like things are driven by a couple considerations. As Yan alluded to, land transfer tax, which in Ontario would be on lease of 50 years or more, can make a determining factor in terms of what term you want. And where you're doing less than all of someone's lands, the Planning Act and other subdivision requirements in other provinces will have a play into what people want.

And then maybe more in particularly on the security side because I think that's where the Quebec differs a bit, and in the common law provinces, you would be charging as the holder of one of these leases your interest in the lease, essentially. And your interest in the building and any improvements comes with your interest in the lease, and you're giving leasehold security to a lender, and they have to enter into arrangements with the head landlord to get comfortable usually in those circumstances in terms of what happens to them in case of lease default. But not like an emphyteusis where you might have more absolute rights to charge and certainly no as of right to acquire the freehold from under your lease, no matter what your building's worth.

YAN BESNER: Great. So the next topic we want to discuss is purchases and sales and vehicles to get you there or the actual purchasing entities. Something to discuss right off the bat is that in the civil code of Quebec, the legal warranty is included in every contract of purchase and sale of any property, whether we're talking about real property or personal property. It's included even if the contract is silent.

Now, what does that mean? Legal warranty speaks to warranty as to title, so warranty as the ownership, you own the thing, and warranty as to quality. It works the way you want it to work. Or more importantly, it's free of latent defects.

Now, in the case of real estate, that is an even more of a problem or can be more of a problem in Quebec if a purchaser is not diligent, or more importantly, if a vendor is not diligent in making sure that it only warrants what it wants to and doesn't represent more than it intended to or knows about. So title being one thing, you own it. Representation as to title is not something that in a commercial transaction between sophisticated parties, or I would even daresay in a commercial transaction period would ever be given because you could end up warranting the title has been properly transferred since the beginning of time or the creation of that parcel, and that can be a very onerous thing to do. Obviously, there are ways for a purchaser to satisfy themselves as to whether the owner is the actual owner, but as a vendor, I would caution, and I do note that traditionally, this is not done to not give a rep or warranty as to title because of how onerous it can be.

Same thing is to quality. Now quality, again, when we talk in the commercial context, we're talking about whether the building is free of any physical defects. Piping, lighting, foundations, all that sort of thing. It can also be expended towards environmental issues, contamination, soil, et cetera, all things that quite honestly personally can satisfy themselves on during due diligence.

But if your agreement is silent on it, then the vendor is giving you those reps and warranties, and more importantly, they will last throughout the end of time until damages is actually revealed, and then our statute of limitations about bringing a claim come into effect. So I think that's a big thing for those who are outside the province to note that if it's silent, that means it's included. Now, how to exclude it is again something that the courts are very picky on. So even though in your purchase and sale agreements outside of Quebec are probably used to seeing to be purchasing as is, where is, where you exclude fitness for a particular purpose, merchantability, and a whole sorts of things over two or three paragraphs as I've seen, there is some magic wording that needs to be said here, and they refer to certain articles in the civil code.

You don't need to-- you have to say on top of on an as is, where is basis, but at the purchaser's risk and peril. And I would even add from a vendor who's a nonprofessional seller. These are all concepts that offline I'd love to get into detail with any and all of you, but if any of those magic words are missing from your as is, where is clause, there are some judges in Quebec, even a former real estate professional in private practice, who have viewed that no, legal warranty was not properly excluded, and the vendor ended up giving up the farm. So that's my piece on that. Thoughts?

ROD DAVIDGE: So outside of Quebec, I think there are situations where there can be some deemed reps, and that is why we would always advise people to have as is, where is clauses when acting for a vendor to the extent you can obtain it. I think the difference we have is that the magic word concept isn't quite there, so we might rely on more general statements, and you'll see anything from a paragraph to three, four, or five. But we won't have that specific focus on specific words, generally, and it's something you'll see when you get Quebec comments on an agreement on a section that otherwise stays pretty much the same. But you'll see that they ensure that those words get inserted.

YAN BESNER: OK. The next issue I wanted to talk about is the whole concept of nominee, beneficial ownership, registered ownership. Here are things where I think from a commercial standpoint, the two different legal traditions essentially have the same intent and get to the same finish line. However, we get there from-- we start at different points. So there's the concept of mandate and counter letter in the civil code where pursuant to a counter letter, an agreement which is only between the two parties who are aware of it, they set out the true intent of what the relationship would be. So in this case, that would be your nominee agreement, where the one person decides that they will be the registered title holder for and on behalf of the real owner of the property, and that is, in this case, pursuant to a mandate.

Our registration rules, or the land registry office, if you will, declares one owner. The owner on title is the owner. If you are a third party in good faith, meaning you have no idea of the existence of that counter letter, that nominee arrangement whatsoever, well, you can rely on the person who's on title as being the owner and just deal with that person, and you will have gotten everything you need in terms of getting a proper transfer or any other dealing, for that matter, with that owner. But however, once you become aware, you're now in bad faith, and you know you're dealing with a quote unquote "shell," if that's the nominee, as they typically are.

No assets or anything other than acting for and on behalf of someone else. And then that become problematic, and then that's when you will want to be dealing with the real owner. Lenders are particularly sticklers on this and will always ask for traditionally an intervention in security documents by the real owner, even though on title, you will never see the real owner show up there, quite honestly, other than in security that is granted and registered on title.

ROD DAVIDGE: Yeah, so this is one I often find a bit, you know-- I don't know if frustrating or confused is the word because when I do deal with Quebec people, they often say that they just don't have the concept of a nominee or a beneficial owner, whereas listening to this again, I think they do, and I don't think anything's particularly different. We used, again, different terminology, right? We'd normally call them a nominee. Some people call them a trustee. But it's obviously quite common, the whole title and the name of someone else on behalf of others.

That the real distinguishment I find is that we would not disclose a beneficial owner on title, and it may depend on the province, but certainly in Ontario, disclosure of beneficial owner can trigger land transfer tax. You know, what doesn't trigger the fact that they hold can be the fact that it's not disclosed on title. So we would never have an agreement on title that disclosed them as a beneficial owner.

You'll sometimes see-- you'll even see this in mortgage documents because there's mortgage documents where the beneficial owner is a party as some form of covenant or where it's easier to have them sign actual mortgage documents, and if you look, they're very careful to call them a covenant or a nowhere actually disclosed that the reason they are that is they're beneficial owners. So that is something we like to av-- we want to avoid or have to avoid, and I find something that surprises people when they sign Quebec stuff for the first time where a beneficial owner goes on title, and it doesn't really concern Quebec council.

YAN BESNER: Yeah, I think we're also very sensitive that way too, whether it's if you're acting for borrower or the lender, that the intervention by the real owner or beneficial owner, he'll only charge or hypothecate its interests as they may have them or in some generic way without confirming that they are the real owner. Only once have I had a real fight, though, with a bar's council on them not wanting the intervention of the real owner. And in the end, the lender caved, but there was a lot of concern around that.

Title searches and opinions with regard-- and this kind of ties in as well as with title insurance. So as I alluded to before, the representation as to title is a huge one to give, and that employs a lot of legal professionals in the province of Quebec who actually do title opinions and title searches. So just as a quick warning, don't call your Quebec council two days before you're doing a closing and ask for a title opinion or a title search because you're setting them up to fail. It can be quite complicated to do.

One last thing I'd like to note in terms of holding title, we don't have an issue of whether a trust or a limited partnership is registered on title in the name of a limited partnership or a trust, especially if those entities are created under the laws of Quebec because they have what we call separate patrimony, or they have their own basket of assets that is separate from either the partners or the trustees. Rod, I think there's something different in your backyard, correct?

ROD DAVIDGE: Yeah, that's right. So a trust or a partnership itself wouldn't be a juridical entity in Ontario and probably some of the other common law provinces. And so you can put them on title, and there's ways to put some of them on title, but you have some concerns from a conveyancing perspective that the registrar or someone might seek to see the chain of who actually the trustees were or who the partners were from time to time in order to go from one conveyance to another. So generally speaking, you avoid that in every instance.

And you use a nominee, or in the case of a limited partnership, you might use the GP. But we do not put limited partnerships on title or do it as little as possible. And that's something, again, that you'll see a difference in Quebec where it's not as big a problem or a problem at all.


ROD DAVIDGE: We also, frankly, would prefer more than overnight notice to give a title opinion.

YAN BESNER: As an ancillary consideration on purchases and sale, which is something that comes up really honestly not only in real property transfers but in sales of businesses in the province of Quebec, which last time I checked, I think the province of Quebec in North America was maybe unique in this as being pro-employee. So if one is not careful in terms of buying a shopping center or buying a piece of real estate itself that can be characterized as an enterprise or its own business, there may be-- and I say may be because I'm a real estate lawyer, not a labor one, so I do caution you to check with either your human resources consultants and/or your labor lawyers.

There is a cause for concern to ensure that part of the assets that are being transferred would include automatically by law the employees. Rule of thumb is that when you buy a business in the province of Quebec, an asset that has to get transferred are the employees. Or said otherwise, termination of employment because of the sale of a business is not justified under law.

That doesn't mean that there aren't ways around that and that there are ways to, while being on side with the law, make sure that those employees are properly taken care of in whatever avenue, whether there's a continuation of the employment or not. But that is something to be made aware of. It is standard in all our purchase agreements that I've seen where there is either a rep or a conformation or a covenant by the vendor and even sometimes an indemnity that employees do not form part of the purchased assets being sold, but it is still, I think, an important diligence matter for you to be made aware of moreso in the province of Quebec because of how pro-employee and labor the province is.

ROD DAVIDGE: And that's obviously a significant difference from Ontario, where there is not an automatic transfer of employees on the sale of a business. That's something to be handled by the parties under their agreements. There is, however, a similar situation in Ontario relating to service providers under the Employment Standards Act, where there is a subset of employees that were found to be quite vulnerable when businesses traded hands. And I'm talking about lines of work such as landscaping, security guards, people who work in cafeterias.

You normally see this at the property management level where if one property manager hires these people and they're administering their services in a building and the building gets sold and the property manager changes, the Employment Standards Act seeks to protect the jobs of these people. They work at that building. It's not very common that they get transferred to other buildings. So it's a very narrow subset, but it's one that people should be aware of.

YAN BESNER: OK. Moving on. Once you've bought the building, welcome to land transfer duties. This topic is actually a current one if only because of the recent budget that was tabled by the provincial government earlier this year in March and because of the draft legislation that was presented to the National Assembly as recently as two days ago, so with some significant changes to the way things have traditionally been done. But let's get into exactly what land transfers are in the province of Quebec and what they are payable on.

So they are payable on a transfer, the definition is right in front of you, which includes the establishment of an emphyteusis or the transfer of the rights of the emphyteutic lessee. Also at least that exceeds 40 years, so something for all of you to be aware of. It's payable in ways probably not dissimilar to how things work in Ontario.

It's the greater of those following amounts. More often than not, the purchase price is the basis of imposition upon which transfer duties are calculated because people like to overpay for things. But that being said, there will always be, if there's a transfer for $1, at the very minimum, the city assessment will-- or the property value, property assessment by the city will be the basis upon which transfer duties are calculated.

And what is the pain one has to pay? Well, in the city of Montreal, which is the worst-case scenario, and by Montreal, I don't mean the island, I really do mean the city of Montreal, they are the most piggish in terms of collecting transfer duties. But the garden variety throughout the province is 1.5% over any amount of purchase price over $250,000.

But if you happen to be in the city of Montreal, well, as you can see, once you hit over $1 million, it can get quite pricey in terms of what the rates are, going up to 2.5%. But as I had a discussion earlier today with someone, I think Toronto is even worse than Montreal. So I guess we're not that bad.

Where we have caught up, though, the province of Quebec has caught up to Ontario, is that since March, there is now a tr-- there are now transit duties payable not only on registered transfers, because that is when the city was actually made aware of transfers, but on non-registered transfers of real estate. Now, how can you tax something that is not made public to the world? Well, there is a voluntary disclosure obligation now on the parties. They've got 90 days from the date of the transfer to disclose to the city, pursuant to a hold, these disclosure obligations that two days ago in the draft piece of legislation have now been shown, which is not very dissimilar to what a registered transfer would act the parties to disclose. But you've got 90 days to do so and disclose, and then after that, the city will send you a bill.

Just on a registered transfer, transfer duties are paid once you get the bill, not at the moment of the transfer. You wait and let the city come and send you the invoice. Failure to disclose within the 90 day period, however, can result in a whack of a penalty of 150% of what was otherwise payable had you timely disclosed, or voluntarily disclosed. If you pay late, well, then the penalty itself, even though you've paid in full, would be 50% of the amount that was payable. So if you think about it, that's still 150% when you do the math.

So that's a big change of how things used to be because when going back to nominee arrangements with beneficial owners, there was a common practice of having the shares of the nominee transferred to a purchaser and then doing an off-title transfer of real estate that would never get registered. I guess it's quite clear that the governing authorities saw a massive loss in potential tax dollars going to the cities, and we are definitely in some times where everyone's looking for tax one way or another, so they closed that loophole, and ever since March of this year, it's perspective. There is nothing retroactive. So everything ever since March 18 of this year, on or off-title transfers, if it's a transfer as defined by the law, you gotta pay.

ROD DAVIDGE: So as Yan has alluded to, that's been the policy in Ontario for a long time. They closed that loop on off-title transfers some time ago. I think sort of highlighting land transfer tax across the country or even just in Ontario is a bit beyond the scope of our discussion today, but again, he's right that Toronto is the one place in Ontario that's more expensive than the rest of the province. On a balance, it's 1.5%, but in Toronto, it can be double that, and the way the tax is calculated differs slightly based on how much the property is worth.

YAN BESNER: Quick word on environment. For those who own industrial properties or properties that have tenants who actually operate them and have some industrial or commercial activity that is actually designated by the Ministry of the Environment, listed by the Ministry of the Environment as-- well, as quite frankly, as a designated activity that could impose obligations on the cessation or change of use of that activity, it's important for you to note that upon the ceasing of that use or the change of use, and one obviously includes the other, if you're changing, you're definitely ending the use, there is an obligation to do a characterization study, which is essentially a phase two on steroids where you Swiss cheese your property, as far as I understand, to ensure whether or not that property is contaminated.

And if it is contaminated, there's a proper government-regulated rehabilitation program for that property that has to be done. This is important if you own any type of property that could get caught by these uses because on a sale, on top of the due diligence that a purchaser will do, this can actually stop a sale or delay one because no one is going to want to take possession of a property unless that proper characterization study and rehabilitation plan has been receipted by the Ministry of the Environment, so something to keep in mind.

ROD DAVIDGE: So some of you will recognize some of these features that Yan was describing in Ontario. We would not use the terminology characterization study. We would use a phase two assessment, meaning almost the same thing, although the characterization study is more thorough. However, the utilization of the characterization study in Quebec more closely resembles how we would use a record of site condition, particularly when you want to change use of a property or the zoning, if you want to go from industrial to residential. However, there's no requirement in Ontario to perform either a phase two or record of site condition just because you are a regulated activity, as in Quebec.

Another important distinction is that Quebec actually has a registry of contaminated sites. Ontario does not. There is no automatic or mandatory obligation in Ontario to remediate a site unless you are ordered to do so by the Ministry.

Although, if you are filing a record of site condition to support a change in use or change in zoning, that process itself may require that you do some remediation in order to get the RSC to a level that you need it to be in order to justify your proposed rezoning. And under our Environmental Protection Act, there's only an obligation to notify or disclose contamination in the event of a spill or a significant discharge. So those are the major differences between Ontario and what Yan was describing in Quebec.

YAN BESNER: Quick note on hypothecary recourses or honestly the secured rights of a creditor who has a mortgage, or we call an immovable hypothec registered to the property. So first off, to exercise those secured rights, a prior notice has to be registered against title of the real estate, at which point the debtor who's in default has 60 days to voluntarily surrender the property. That 60-day period is also can be viewed as an additional remedy period for the debtor to get current with its loan. If it's not done voluntarily after the 60 days have passed, there can be a forced surrender, at which point the creditor has four options under the civil code in terms of dealing with the property.

Take possession for the purposes of administration, so essentially running the property and getting paid its capital interest until satisfaction of the debt. Probably the rarest one, which is taking in payment, which is available without contestation in general if less than 50% of the debt has been repaid. If more than 50% of the debt has been repaid, then you need a court order. That being said, this action can be stopped by subordinated creditors who are registered on title as secured creditors.

The interesting thing about taking in payment is that this completely extinguishes the debt. So once you take the property, there is no longer any debt owed. Whereas the final two, the sale by the creditor, sale by the judicial authority, that can purge the security. That being said, the debt remains. If there's any amounts left owing, though unsecured, remains existing.

Sale by the creditor, again, is not that popular if only because it has to be done on commercially reasonable terms. Essentially, the terms upon which the creditor can sell the property can be contested. And it's gotta be done as well in a way that is beneficial to the debtor to try and get essentially the most money you can.

Now, no creditor is going to want to get into that and risk having his actions being contested. So they resort to the last one, sale by judicial authority. So you get a court order, which will impose the terms and conditions on the sale of the asset, including potentially appointing a receiver or a trustee to run it until it's sold.

ROD DAVIDGE: So another case where we've got a lot of the same concepts in Ontario, although using different terminology obviously. Taking in payment is akin to foreclosure. We wouldn't have the same relevant concept in terms of how much the debt is repaid, but it has the same effect, which is to extinguish the debt and mean that there's no debt left. You might see someone exercise a power of sale, which would be moreso this sale by creditor.

And I think where it's different is that is a common remedy for mortgage lenders in Ontario. They'll give the notices required and to the right people and will proceed by way of power of sale, and they don't always rely on the fact that they need to go to the court to have it approved or do a judicial sale. So it may well be more risk from in terms of someone attacking on whether they acted reasonably and got what the property was worth, but something they're willing to do and a risk they're willing to take in order to move more efficiently and more quickly.

YAN BESNER: And moving on to our last couple of topics, leases and landlord remedies. So big distinction, at least in Quebec, does not confer real property rights. It's only personal rights. It's the rights to use the premises, and those are the only personal rights that can be registered by way of notice or even an extra on title.

One of the things that I like about it is I don't have to deal with subordination or torment or non-disturbance agreements when dealing with leasing issues. Just register your notice of lease. It doesn't matter whether there's 1,000 mortgages that have been registered prior to the registration of your notice of the lease. As long as those mortgages are current and not in default, said otherwise, there hasn't been a prior notice of an exercise of a secured right, as we just discussed, been registered on title, then in the event any of those rights we just discussed are exercised and there's a transfer to the creditor or to the purchaser of the credit of the property, he's got to take the lease, warts and all.

Same thing with any future purchaser who would come in after the registration of your notice of lease. He has also taken a legal assignment, an assumption of that lease, warts and all. And not just the quote unquote "real rights" or rights that run with the land, like you can use the premises, but I'm talking rights of first refusal, rights to purchase the property, expansion rights, co-tenancies, all those things that may be described here as being personal rights.

That being said, register, register, register because there is no actual notice concept. There is no protection under three years if you haven't registered. So if you are a tenant and you have a lease, there is really no reason to not register it.

ROD DAVIDGE: And so here, you will see dramatic and fundamental differences from a lease in Ontario where in a common law jurisdiction, leases have a dual nature. They are not only a contract, which as Yan has described as the main feature in Quebec, it's also a grant of an interest in land. And that's why in Ontario, we do have to worry about priorities and subordinations and non-disturbance agreements because being a grant of an interest in land, whether the lease comes first or second as compared to a mortgagee or other interests, and can be fundamentally important depending on what the transaction is.

YAN BESNER: Another big difference I find between the two traditions in terms of leasing comes to the issue of termination. So on the next couple of slides, we do have quite a bit of language, which I find interesting because I wrote it, that says that if you want to terminate a lease as a landlord, you better go to court to get a judgment. Termination with judicial proceedings or with a judgment is the rule.

Termination without a judgment is the exception. It is possible, but the landlord is taking a huge risk. You need to have a clearly drafted termination clause in your lease, first of all, and you need to exercise those rights reasonably into the letter of the lease in a very reasonable and fair way because the courts do not take kindly to landlords who take the law into their own hands, especially if the default is of a minor nature, is not something that would be deemed worthy of termination of the whole agreement.

ROD DAVIDGE: And again, Yan and I discussed this that it's rather ironic that in a province that only recognizes a lease as a contractual right, you need to get a court order to terminate, as contrasted to Ontario where a lease is considered to have a dual nature and has more security of tenure for the tenant and by granting an interest in land, and yet we do not require a court in order to terminate. If your lease is properly drafted, you give notice, the time period has expired, if the tenant hasn't rectify, you can terminate the lease, which is a very interesting and unexpected distinction.

YAN BESNER: So with the few seconds that we have left, just a couple of descriptions on what needs to happen or what needs to be in that notice of lease. You do not need to put in all the details. To be honest, everything that the civil code says, which is summarized on this slide, is all you need to get all the protection for all the terms that you have in your lease. What I failed to mention before, though, is that if that notice of lease is not registered in the timely way, which I mentioned, if a purchaser buys your building, does not contractually assume the leases or take an assignment of them, then he can kick out any tenant who has not been-- who did not register their lease on the anniversary date of his acquisition with at least a six-month prior written notice. After six months, essentially then those tenants are fine.

ROD DAVIDGE: And in Ontario-- and if Yan, I could just ask you to back up one slide, please. Those requirements that Yan has noted in Quebec are virtually identical to what would be the terms for a notice of lease in Ontario. So no real difference there. However, on terminating a lease that has not been registered, there is a distinction because our Land Titles Act would deem notice even if not registered if there is actual occupation by the tenant with no more than three years left to run in the lease. So at worst, you may be stuck with a three-year lease that wasn't registered on title as opposed to Quebec, where you're not.

YAN BESNER: So that's it for us for now. Thank you all for joining us. Heather?

HEATHER MCKEAN: This brings us to the end of our webinar a few minutes early, which is always welcome, I think, for participants. As a reminder, Ontario and Quebec CPD certificates of attendance will be circulated by the end of the week. We hope you have found this informative and helpful. Please fill out the survey that you will receive later today to give us your feedback. Thank you very much for joining us today, and have a great late afternoon.